Does Your Noncompete Agreement Violate the National Labor Relations Act?

 The NLRB General Counsel is taking the position that noncompete agreements in employment and severance agreements violates the National Labor Relations Act.

Non-compete provisions are overbroad, that is, they reasonably tend to chill employees in the exercise of Section 7 rights, when the provisions could reasonably be construed by employees to deny them the ability to quit or change jobs by cutting off their access to other employment opportunities that they are qualified for based on their experience, aptitudes, and preferences as to type and location of work. Generally speaking, this denial of access to employment opportunities chills employees from engaging in Section 7 activity because: employees know that they will have greater difficulty replacing their lost income if they are discharged for exercising their statutory rights to organize and act together to improve working conditions; employees’ bargaining power is undermined in the context of lockouts, strikes, and other labor disputes; and, an employer’s former employees are unlikely to reunite at a local competitor’s workplace, and, thus be unable to leverage their prior relationships—and the communication and solidarity engendered thereby—to encourage each other to exercise their rights to improve working conditions in their new workplace.

In addition, non-compete provisions that could reasonably be construed by employees to deny them the ability to quit or change jobs by cutting access to other employment opportunities chill employees from engaging in five specific types of activity protected under Section 7 of the Act. First, they chill employees from concertedly threatening to resign to demand better working conditions. Specifically, they discourage such threats because employees would view the threats as futile given their lack of access to other employment opportunities and because employees could reasonably fear retaliatory legal action for threatening to breach their agreements, even though such legal action would likely violate the Act. Second, they chill employees from carrying out concerted threats to resign or otherwise concertedly resigning to secure improved working conditions. Although extant Board law does not unequivocally recognize a Section 7 right of employees to concertedly resign from employment, such a right follows logically from settled Board law, Section 7 principles, and the Act’s purposes. It is also consistent with the U.S. Constitution and other federal laws. Accordingly, I will urge the Board to limit decisions inconsistent with that right to their facts or overrule them.  

Is this a magic wand that makes your noncompete go poof? No. But it gives you another weapon in your arsenal to challenge your noncompete agreement, assuming your employer is covered by the NLRA (most are). The key here to challenging noncompetes through the National Labor Relations Act is concerted activity. You'd have to be part of a group of employees that want to threaten to resign or go to a better workplace. By yourself, the challenge probably fails. 

Plus, there is no caselaw supporting this specific issue, so there's no guarantee the federal courts as currently constituted (the Supremes have been very pro-employer) would uphold this interpretation.

If you think your noncompete may violate the National Labor Relations Act, you can file a charge against employer with the NLRB within 6 months of the alleged violation, or talk to an employee-side employment lawyer in your state about your rights.